The Iran conflict has ushered in a new era of $90-plus oil, and with it a changed reality for the price of almost everything. Transport costs, manufacturing inputs, food production, heating bills, and airline fares are all linked in some way to the price of crude oil. When that price surges more than 25% in a single week — as it has since hostilities began — the downstream effects on consumer prices eventually touch every corner of the economy.
The supply disruption driving the surge is severe and potentially lasting. Kuwait has already cut production at storage-full oil fields, and energy consultants estimate Saudi Arabia and the UAE face the same crisis within 20 days. Qatar’s LNG exports have been disrupted by a drone strike, cutting roughly 20% of global LNG supply. And the Strait of Hormuz, through which a fifth of global oil and gas normally flows, has been effectively closed to commercial traffic by Iran’s threats and vessel attacks.
The worst-case scenario being discussed by market participants is oil at $150 a barrel — a forecast made by Qatar’s energy minister in the event that the conflict continues and all Gulf exporters halt production. At that price level, the economy-wide effects would be severe. Inflation would surge, growth would fall, government finances would be squeezed, and consumers would face very significant increases in the cost of living.
Even at current levels, the economic consequences are significant. Bond markets have priced in higher inflation and abandoned interest rate cut expectations in both the UK and eurozone. Stock markets have fallen sharply, airlines have warned of massive losses, and gas prices have hit three-year highs in Europe. The UK’s FTSE 100 suffered its worst week since the Trump tariff shock, while Asian markets had their worst week since the pandemic.
The era of $90-plus oil has arrived with remarkable speed, driven by a conflict that began barely a week ago. Whether that era is a brief episode or a new structural reality depends entirely on how and when the Iran conflict is resolved — and on whether the global energy system can find ways to route around the Gulf disruptions that are now its defining feature. For now, the price of everything is rising.